Chapter 7 is generally known as a complete liquidation. Debtors who file Chapter 7 are required to list all of their assets and liabilities in order to discharge their unsecured debt. By applying for various exemptions, debtors may be able to retain many of their Assets in chapter 7.  Florida law provides debtors with many exemptions not available in other states. However, those assets that are not subject to any exemptions may be required to be liquidated for the benefit of the creditors. 

Eligibility of Chapter 7 Bankruptcy

In order to determine whether you qualify to file a case under chapter 7 or chapter 13, in 2005, the Bankruptcy Code was amended to incorporate what is referred to as the means test. The means test goes through a series of prongs that determine whether or not you are eligible to file a chapter 7. The initial prong is to determine whether a debtor’s household income is above or below the state median income for a family of similar size. If you are, say, a family of two, just a husband and wife, no children, and you are filing jointly, and your gross annual income is less than the state’s median income for a family of two, you would qualify for a chapter 7 without having to go through any of the other qualifying steps. 

If your gross income is greater than the median income for a family of two, then you go on to additional prongs utilizing the national living expense standards, set by the IRS and other government departments as to how much you can attribute to your mortgage or rent, ownership of a vehicle, food, and other living expenses. And if there is any disposable income, after you deduct those expenses from your income, you would likely be required to file a Chapter 13. If required to file under chapter 13, you would propose a plan to pay your creditors 100% of your disposable income over a period of  5 years. Upon completion of your plan payments, you would receive a discharge of the balance, if any, of your unsecured debts. However, if you don’t have any disposable income after deducting the expenses, you would qualify for chapter 7. 

Process of filing a Chapter 7 Bankruptcy 

In general, the process for filing any bankruptcy case would begin with an initial meeting with an attorney to gather information and determine your reasons for having to file a bankruptcy case, and to decide whether it is an appropriate remedy for your situation.  If it is determined that filing bankruptcy is right for you, then we would determine whether or not you qualify for a chapter 7 by discussing your financial situation and going through the means test. 

Assuming you qualify for a chapter 7, we would continue to gather the necessary information to complete the petition and schedules for filing the bankruptcy case. Once we have prepared the paperwork, we review it with our clients to make sure all of the information is correct and once it is, the client will sign the petition and schedules and we file the case. Once the case is filed, approximately 30 days thereafter, you would attend your section 341 first meeting of creditors, where the trustee would ask you a number of questions concerning the information provided in the schedules and other information that various trustees collect prior to the 341 meeting.  

Thirty days after the 341 meeting is the deadline for the trustee to object to any exemptions that we have claimed. Any objections by creditors to the dischargeability of a particular debt or to your discharge in general must be filed within 60 days after the 341 meeting. 

If no objections are made to your exemptions or discharge or dischargeability of a debt, then you should receive an order of discharge approximately 90 days or so after we file the case.

Role of a Bankruptcy Lawyer

It’s important to consult an attorney for any legal matter you are about to engage in, especially bankruptcy. Oftentimes, if not properly consulted, you could end up either in the wrong proceeding or not achieving the goals that you wish to accomplish in bankruptcy. 

Bankruptcy is a serious procedure governed by federal law with significant sanctions if you don’t do everything correctly. So for that reason, it’s very important that you consult a knowledgeable bankruptcy attorney to guide you through the process; make sure that you are doing everything you need to do correctly, and assist you in every step of the way through the process.